Find expiration day payoff to seller

Assignment Help Financial Management

Reference no: EM131963657

Consider contracts (call, put, forward) on 1 share of I.B.M.

Expiration date: December, 31 of current year. Forward price is $ 100.

Strike price is $ 100 for options. Cost of options is $ 10 for put and for call.

Consider a range of prices for I.B.M. on the expiration day:

$ 0, $ 20, $ 40, $ 60, $ 80, $ 100, $ 120, $ 140, $ 160 ...per share.

Do a spreadsheet and a chart using for the following:

Find expiration day payoff (ignore the proceeds of initial sale) to a seller of

1. A) 1 call, B) 1 put, C) 1 forward

Find profit and loss (including the proceeds of initial sale) to a seller of

2. A) 1 call, B) 1 put, C) 1 forward

Take the above charts that you printed and draw them by hand.

Note: Contracts on foreign currencies are conceptually similar; these diagrams (or charts) will also help you with hedging foreign exchange risk.

Reference no: EM131963657

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